Hewlett-Packard Company (HPQ)‘s new management team is putting the company on course to return more cash to shareholders, and HPQ‘s low stock price and tremendous amount of operating cash flow are setting the company up to be a solid value opportunity in the technology sector, says Daniel G. Lysik, Founder and Managing Director of Pratt Capital, LLC.
“At current prices, Hewlett has a price to cash flow multiple below three, a forward price to earnings multiple below five and a free cash flow yield over 20%. Current valuation levels are at 30-year lows, and significantly below where they should be for a company with the franchise and market-leading positions as Hewlett-Packard,” Lysik said.
New management changes have led to better decisions for the company regarding asset integration, right-sizing the cost structure and new product innovation, and the amount of operating cash flow HPQ is generating should yield more share repurchases and increased dividends, says Lisik.
“With more than $20 billion in cash and long-term investments, as the company continues to reduce debt, there will be a significant opportunity over the next couple of years to return more cash to shareholders through share repurchases and increased dividends,” Lisik said. “I believe Hewlett-Packard has normalized earnings power closer to $5 per share as the company sees resumption of revenue growth and steady operating margin improvement. We believe Hewlett-Packard’s intrinsic value is north of $40.”
Hewlett-Packard Company (HPQ) a Turnaround Story Trading at 4.5 Times Cash Flow
June 10, 2013
DineEquity (DIN) Positioned to Return Capital Through Dividends and Share Repurchases
March 13, 2013
Avery Dennison Corp (AVY) Returns Capital Through Dividends and Share Repurchases
September 18, 2013
C.R. Bard, Inc. (BCR) Investing in Share Repurchases and Growth Projects
May 13, 2014
Cardinal Health Inc (CAH) Looks to Re-Establish Medical Side of Business, Offers Positive Bias Toward Dividends
August 26, 2013
